NRECA to OMB: Fuel Diversity is Key

By Cathy Cash | ECT Staff WriterPublished: August 26th, 2013

A federal mandate to cut carbon dioxide and favor natural gas generation could prove costly for a large portion of American consumers, including many of the 42 million electric cooperative members who rely on coal-based electricity, NRECA told the Obama administration.

NRECA wants federal regulators to be aware of the consequences of favoring natural gas plants in new emissions standards. (Photo By: Ron Thomas)

In a meeting with officials from the Office of Management and Budget, NRECA representatives outlined how a carbon dioxide standard aimed at new coal plants could hamper co-ops’ ability to provide affordable power on a reliable basis.

“Setting a carbon standard unattainable by new coal units would leave consumers largely dependent on electricity from natural gas, which has a history of price volatility,” said John Novak, NRECA executive director of environmental issues.

Regulations that force generators to rely more on natural gas could raise electricity costs and open the nation’s electric grid to potential supply failures, said Novak, who attended the Aug. 12 meeting with members of the NRECA environmental unit.

“Fuel diversity is the most cost-effective strategy,” Novak said. “Fuel diversity is necessary to manage bills to consumers.”

Under President Obama’s climate change policy, the Environmental Protection Agency plans to propose a carbon dioxide standard for new power plants by Sept. 20. The agency is expected to propose a carbon dioxide standard for existing power plants by next June, and finalize that rule by June 2015.

In 2012, EPA drafted a carbon dioxide standard with emissions limits that industry officials say can only be achieved by state-of-the-art natural gas units.

Low gas prices have contributed to increased construction of combined-cycle gas plants in many locations. Spot prices are ranging around $3.50 per million Btu.

However, natural gas prices are subject to outside factors, such as weather extremes, business cycles, and pipeline infrastructure issues that could lead to spikes and supplies, Novak noted.

If EPA requires new coal plants to adopt carbon capture and storage technology, it will fail to insulate consumers from natural gas price spikes, Novak cautioned. Such a requirement could double the price point at which coal and natural gas production are comparable.

“Technology to capture and store carbon dioxide emitted from coal generation has not been deployed at commercial scale at any power plant anywhere in the world,” Novak said.